June and July are typically weak months in the sports world. The biggest sports are the offseason and most of baseball is slow moving and one single game or play just doesn’t matter. So ESPN and other members of the sports media were really excited that the arguably best football player currently playing was reaching the deadline to negotiate a new contract.
That player is Drew Brees. He came to New Orleans some time ago and was a part of rebuilding the team and the town post-Katrina. He’s a hero around there and a talented quarterback. I won’t bother explaining the details of the NFL’s franchise tag, but let’s just say Brees was due for a new contract and deserved to perhaps be the highest paid football player ever. Which he got. But it’s not so easy.
How the negotiation works
First of all, Brees wasn’t allowed to negotiate with other teams to find out how much he was worth. So he had to look to his quarterback peers to get what the real estate industry calls “comps” or comparables. Peyton Manning signed a $96 million 5 year contract earlier in the year so this likely served as the baseline.
Second, these contracts can get quite complicated. There’s guaranteed money and then there’s money you get if you continue to perform. Manning has a $96 million contract but there’s a lot of built in lines that give his team a way out if he can’t stay healthy, a considerable issue for an aging QB that sat out an entire season last year. So $96 million might only be $18 or less if Manning turns out to be too hurt to play.
So for Brees he has a few different things he has to do. He has to make his case for being worth more than anyone else in the league, and get as much guaranteed or upfront money as possible. Of course Brees doesn’t do the negotiation. His agent does. Agents can play the bad guy for the player. They do all the background research on other player contracts and play hardball to get them the best deal, in exchange for a cut of course. But no one argues the value of a good agent, and Brees’s is no different.
Brees got his record setting contract, $100 million with more up front money than Manning. In a radio interview Brees played the role of a class act perfectly (he probably is). He explained he never set out to be the highest payed player in the NFL, it was just a matter of assessing the trend in QB salaries and seeing where things were headed.
And he’s right, while he may be the most valuable and expensive player in the league today, he won’t be in a few years. Up and comers are destined to outpace him in pay, they will likely get even more than Brees did. He considers himself a stepping stone to the ever increasing value of talented quarterbacks.
It’s all about the details
These contracts are really complicated. There’s a lot build into them but even more that’s just implicit. Say Brees donates 5% of his pay to causes that help the NOLA area. He might tell the Saints negotiators he’ll step up his community involvement publicly and financially. This will help raise the value of the team in the community, which drives ticket and merchandise sales. So in effect Brees might be earning more than other QBs, but he might be doing more too.
Or is it the bottom line that really matters?
If you’re Drew Brees all you really care about is making sure you’re properly valued. He’s essentially selling his services and the New Orleans Saints are buyers. In a negotiation it’s common for one side to focus on the details, whereas the other wants the big number. This can make negotiations easier, but each side will always start by asking for way more (or less) than the other side is prepared to give. Brees might have come in asking for $110 million with more guaranteed. And the Saints might have taken away a lot of the guarantees and asked for more use of his name and brand in their marketing efforts.
The important thing in any negotiation is to understand what the other side is after. The New Orleans Saints can afford just about any price Brees asks for, but they want to get a good deal for their money. There are other restrictions in place too, in many pro sports there are salary caps. This keeps one team with tons of money for buying up all the talent in the league. It’s complicated, but every extra dollar they pay Brees that’s one less dollar they can pay the other talent on the team.
So this negotiation started with Brees needing to feel valued and the Saints making sure they get a good value for their investment and leaving enough money on the table to pay the other players (Brees needs good players around him to succeed after all).
In the end it was no surprise to anyone that a deal got done. Many thought it wouldn’t take so long (it took right up to the league’s deadline) but they just don’t understand negotiations. Contracts almost always go up to the deadline, because no one has an incentive to try and get it done earlier. You can wait for the other side to possibly start sweating and blink. It rarely happens, but that’s besides the point.
Anyone can leverage the same tools when negotiating things for themselves. For example, you can haggle over price for your car and if you get a little resistance for the dealer to go lower, you can throw some bones at them. Say you’ll send 5 quality customers their way, or ask for free oil changes or your next set of tires. The headline is almost always about the big number, but in the end the details are usually what gets the job done.